Audit: Auditing and Financial Report

1912 Words Aug 3rd, 2013 8 Pages
CHAPTER 1

REVIEW QUESTIONS

1.2What qualities must an ‘assurer’ have in order for you to feel that their statement has high credibility?

An assurer must have the knowledge and expertise to assess the truth and fairness of the information being presented by the preparers. Auditors of financial reports need to be trained accountants with detailed knowledge about the complex technical accounting and disclosure issues required to assess the choices made by the financial report preparers. When undertaking an audit, the auditor should use professional scepticism, professional judgement and due care.
Auditors should be independent of the client. Independent auditors have no incentives to aid the entity in presenting their results
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The emphasis of matter paragraph is included in the audit report immediately after the opinion paragraph.

An emphasis of matter paragraph draws the attention of the reader to an issue that the auditor believes has been adequately and accurately explained in a note to the financial report. The purpose of the paragraph is to ensure that the reader pays appropriate attention to the issue when reading the financial report. The audit report remains unqualified and the user of the financial report can still rely on the information contained in the financial report (ASA 706; ISA 706).

The emphasis of matter paragraph is not used when the entity has not disclosed the issue in its report. The auditor can use an ‘other matter’ paragraph to introduce another matter that the auditor believes should be disclosed.

The usual circumstance which would warrant an Emphasis of Matter paragraph in the auditor’s report is the existence of a significant uncertainty, the resolution of which may materially affect the financial report.

From ASA 706:

A1. Examples of circumstances where the auditor may consider it necessary to include an Emphasis of Matter paragraph are:

- An uncertainty relating to the future outcome of exceptional litigation or regulatory action.

- Early application (where permitted) of a new accounting standard (for example, a new Australian Accounting Standard) that has a pervasive effect on the financial report in advance of
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